Plethora Farms purchased a greenhouse for $52,700. Delivery costs totaled $1,825 and handling costs were $3,000. The useful life is 10 years and the salvage value is $14,050. Using the straight-line depreciation method, calculate the book value at the end of year 4.

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Quizplus · Accepted Answer

The total cost of the greenhouse is the purchase price plus delivery and handling costs, which is $52,700 + $1,825 + $3,000 = $57,525. Using the straight-line depreciation method, the annual depreciation is (Total Cost - Salvage Value) / Useful Life = ($57,525 - $14,050) / 10 = $4,347.50 per year. After 4 years, the accumulated depreciation is $4,347.50 * 4 = $17,390. The book value at the end of year 4 is the total cost minus the accumulated depreciation: $57,525 - $17,390 = $40,135.

Plethora Farms Purchased a Greenhouse for $52,700